Compliance Outlook

1. Compliance Outlook Garnishment Rule

2. Garnishment Rule • Garnishment Rule revised by: • Department of Veterans Affairs, • Office of Personnel Management, • Railroad Retirement Board, • Social Security Administration, and • Treasury Department. Effective June 28, 2013

3. Garnishment Rule • Federal benefit payment exempt from garnishment include: • Social Security benefits, • Supplemental Security Income (SSI) payments, • VA benefits, • Federal Railroad retirement benefits, • Federal Railroad unemployment and sickness benefits, • Civil Service Retirement System benefits, and • Federal Employees Retirement System benefits.

4. Garnishment Rule Definitions • Benefit Payment: • Benefit payment means a Federal benefit payment (referred to in §212.2(b)) paid by direct deposit to an account with the character ‘‘XX’’ encoded in positions 54 and 55 of the Company Entry Description field and the number ‘‘2’’ encoded in the Originator Status Code field of the Batch Header Record of the direct deposit entry.

5. Garnishment Rule Definitions • Garnishment Order: • A Garnishment order means a writ, order, notice, summons, judgment, levy or similar written instruction issued by a court, a State or State agency, a municipality or municipal corporation, or a State child support enforcement agency, including a lien arising by operation of law for overdue child support or an order to freeze the assets in an account, to effect a garnishment against a debtor.

6. Garnishment Rule Definitions • Protected Amount: • The lesser of the sum of all benefit payments posted to an account between the close of business on the beginning date of the lookback period and the open of business on the ending date of the lookback period, or the balance in an account when the account review is performed. • Examples are provided in the rule: http://www.gpo.gov/fdsys/pkg/FR-2013-05-29/pdf/2013-12567.pdf

7. Garnishment Rule • Garnishment Handling: • Determine if the United States or a State child support enforcement agency is the plaintiff that obtained the order and if a Notice of Right to Garnish Federal Benefits is attached or included. If so, the credit union follows its customary procedures for handling the order. • If not, the credit union must review the account history for the prior two-month period to determine whether, during this “lookback period,” one or more exempt benefit payments were directly deposited through Automated Clearing House (ACH) to the members account. The protected benefit payments deposited through ACH during the “lookback period” are exempt from garnishment.

8. Garnishment Rule • Effective of transfers on garnishment: • Funds transferred from one account to another are excluded from the account review and the establishment of the protected amount. • The individual sub account where the Federal benefit payment was credited (and not the “master account”) is subject to the account review and lookback.

9. Garnishment Notice • Credit unions should now issue the required notice when: • A benefit agency deposited a benefit payment into an account during the lookback period; • The balance in the account on the date of account review was above zero dollars and the financial institution established a protected amount; and • There are funds in the account in excess of the protected amount.

10. Garnishment Fee The credit union may not charge or collect a garnishment fee against a protected amount. The financial institution may charge or collect a garnishment fee up to five business days after the account review if funds other than a benefit payment are deposited to the account within this period, provided that the fee may not exceed the amount of the non-benefit deposited funds.

11. Thank you for joining me for this review of the Garnishment Rule. Stay Tuned…….. Shawn Wolbert, CIA, CUCE Director CU System Relations 101 S. Washington Square, Suite 900 Lansing, MI 48933-1703 (800) 262-6285 Ext. 486 (734) 658-5427 Mobile Follow me on Twitter – Shawn Wolbert @ Go2CUGuru